The official argument from the drug companies is that Pharmac is anti-competitive. Anyone who looks at the pharmaceutical industry and reckons that is a competitive market has to be a bit loopy.

It is an oligopoly at best, with a handful of huge players running the show across the entire globe.

Pharmac is a little bit like forming a union to have equal bargaining power with big employers - it negotiates and purchases medicine on our behalf.

In New Zealand, the public's health is regarded as a social good, so we levy taxes and the state provides the public health services.

We have rejected the private competition model for this sector. The US is slowly coming around to the fact that places like Canada and New Zealand deliver a better average health service. The US system is great if you are crook and have the bucks, it sucks if you don't.

The drug company claims that Pharmac has failed are based on the fact that New Zealand's pharmaceutical budget is much lower and is growing slower than other countries. To suggest this is a bad thing completely misses the point of having Pharmac in the first place. If anything this is a sign of Pharmac's success.

While spending in most health sectors around the world (ours included) has been out of control, since its inception in 1993 Pharmac has stuck to its budget. So now spending is lower than elsewhere, and makes up a lower proportion of our otherwise bloated health system.

Another claim is that our access to medicines is much lower than overseas. Wakey wakey, folks. New Zealand is not as rich as the countries we like to compare ourselves to.

We may have just overtaken Greece in the OECD rankings, but this is hardly of our own doing. Our income per capita continues to slip behind Australia, and will probably continue to until we strip-mine the Coromandel Peninsula.

We have fewer resources, and so can afford fewer pharmaceuticals. Pharmac is actually the envy of other countries which have far deeper pockets than us.

Pharmac's job is to get the best value for the budget it manages, and it does this job very well. It does this by buying the medicines that add the most years of healthy life for the money spent, and striking the best deal with the pharmaceutical giants.

Clearly these bullies are not used to someone standing up to them in the playground. As a result, Pharmac spends around one fifth of the amount on statin drugs - which lower cholesterol levels and so reduce the risk of a heart attack - than the Aussies do. Given the colossal size of our heart disease problem this makes a huge difference to our drug bill.

And this is what we should judge Pharmac on: not how much it spends, not whether it buys the latest unproven experimental drugs, but the value it gets for every dollar spent.

National shot itself in the food on the whole Herceptin issue. At the time it was a cynical political vote grab, but now it faces the consequences.

In overruling Pharmac it implicitly agreed with the arguments of the drug companies and gave their arguments weight. Now the question is whether the Nats will realise their mistake and stand up for Pharmac.

If we decide as a nation that we want more pharmaceutical spending, which National clearly did in the last election, it should have given the extra money to Pharmac and let it work out how to spend it.

That way it can ensure we get the greatest number of extra healthy lives from every dollar of spending.

Rationing like this isn't a pleasant job - someone always misses out and will inevitably complain.

Not everyone likes the decisions that Pharmac makes. But at least these decisions are made in a fairly transparent, evidence-based way. There is no better way of making these difficult decisions.

The problem is not Pharmac, the problem is that the rest of the health system isn't more like Pharmac. If the rest of the health system was more like Pharmac then we could more easily see where the best place is to put any extra money.

That is why since publishing the book Health Cheque with co-author Geoff Simmons, I have been advocating the formation of an independent body to prioritise all new health spending. This body would need to be led by health professionals.

Under such a system we could see if we could keep more people alive by spending more on drug X and less on operation Y. That is the only way we would really know if the amount we are spending on drugs makes sense or not.

In the meantime, the current system is working pretty darn well.

But of course the drug oligopoly wishes it could control our drug budget, and will no doubt be seeking the backing of US government negotiators. Tough.

Leave Pharmac alone, America, just buy our butter and wool and we'll buy your Harley-Davidsons. Or get lost and we'll deal with China instead.

I was going into the supermarket. A family of Asians were coming out, with three big trolleys loaded up with large bottles of a well-known soft drink. I checked. The product was not on "special", but at its normal supermarket price.

All right, you won't need to be Einstein to figure out that these people owned a corner dairy or perhaps a small suburban liquor store. The supermarket chain was able to screw such a good wholesale price out of the supplier of this product, that its retail price was lower than what the small shop could get it for at "wholesale".

And that's what Pharmac does, on behalf of its shareholders, the people of New Zealand, who are also its clientele. It buys aggressively, and we all benefit.Some people hate Pharmac. They feel that they should be pocketing huge dividends when anyone gets sick, or in the case of my blood-pressure pills, when anyone doesn't get sick. Health is a luxury, and it should cost a lot of money, and someone should be getting rich.

In the US they have a phenomenon: "beggar plutocrats". These are comparatively poor people who were conned into "conscientiously" opposing health reforms from which they themselves would have benefited.

Vaughan I (New Zealand) |
10:17AM Tuesday, 24 May 2011

Fighting talk Gareth, and good sense too. We are right behind you.

Gandalf (St Heliers) |
10:17AM Tuesday, 24 May 2011

The article is spot on, Pharmac does well, and I agree with Gareths ideas.But the free trade argument is simplistic.

In the 19th century America traded freely with Britian exporting commodities and importing Britians manufactures,but America didnt do as well as Britian, So America put tarriffs on imports from Britian and quickly turned into a manufacturing powerhouse and the wealthiest Nation in history.

Britian persisted with free trade and went down the tubes. I dont support tarriffs, but this competative advantage thing is just a bit simplistic.